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By August 2015, Tshifhiwa Matodzi was the chairman of VBS, South Africa’s first and only wholly black-owned bank at the time.

He was backed by an apparently loyal executive team who, he claims, begged him to take the reins. The man leading that team was Andile Ramavhunga, whom Matodzi knew from university and had recruited to be CEO. Shortly after Matodzi became chair, VBS appointed Gobusamang Mothoagae, another old friend and RAU alumnus, as a long-term consultant. Mothoagae’s company, Tiisang Risk and Assurance Consulting, received R2.5 million’s worth of business from VBS in the last few months of 2015.1 This relationship would continue until the very end.

Tiisang was a seemingly legitimate company doing work in the public sector. In a 2017 declaration of assets, Matodzi admitted to being a shareholder in Tiisang and a related company, Tiisang Private Capital.2 He also allegedly controlled Tiisang’s bank accounts.3

Matodzi called on old friends from university to make up for what he believed was a dearth of skills at the bank. He turned to the Venda boys because, he claims, VBS was initially a passion project offering lower salaries than employees would have previously earned. ‘The bank had no skills. The bank had no money to pay salaries. So you can only approach people you know,’ he told me. ‘I was very actively looking for people I know, who I can sell the dream. I said, guys, we need skilled people here.’4

It may have been a necessary expedient for a tiny black-owned bank with zero connections in the established financial services sector, but this kind of crony recruitment also set the scene for the bank to fall under the complete control of a small number of individuals. Matodzi was not the only one hiring friends.

When Ramavhunga became CEO, he almost immediately called up his childhood friend and fellow RAU alumnus Mauwane Kotane and gave him a contract to source business for the bank. Kotane was at the time a respectable financial consultant and on the board of the Finance and Accounting Services Sector Education and Training Authority. The conflicts of interest, however, were laughable. Kotane and Ramavhunga had a number of business ventures together, and Kotane even returned the favour by paying Ramavhunga’s private consulting firm, Andile Ramavhunga Consulting, hundreds of thousands of rands for undisclosed work done in 2015 and 2016. Ramavhunga only begrudgingly admitted to Advocate Terry Motau that this was a conflict of interest.5

Kotane later drew his old friend and VBS into an under-publicised scandal in Namibia, which we’ll get to later.

By the time Matodzi took control, VBS had already begun developing a loans-for-friends culture. One of its major new clients in 2015 was Brilliant Telecommunications, his and Maanda Phalanndwa’s company. In the course of 2015 and early 2016, Brilliantel got R15 million out of VBS. Phalanndwa also received personal loans, which he says he either paid back or is still paying back.

Matodzi hasn’t forgotten that: ‘VBS helped him [Phalanndwa] a lot. That company would have died. He’s got apartments in Durban funded by VBS. Brilliantel has vehicle finances. He got lots of help. He’s lucky. If I was a vengeful person I would have just said to [investigators], check this guy; they would’ve chased him.’6

Dyambeu was becoming a hindrance to Matodzi with the constant infighting and his partners’ increasing exasperation every time he broke ranks. To get out of Dyambeu, he would have to first get out of Brilliantel, through which he and Phalanndwa owned their VBS shares. In October 2015, little over a month after becoming chair of VBS, Matodzi resigned from Brilliantel and set out to get direct shareholding in first Dyambeu and then VBS. His critical royal allies – Venda king Toni Mphephu Ramabulana and attorney Paul Makhavhu – also needed an exit strategy from Dyambeu and, by extension, the VhaVenda Heritage Trust.

‘The king and Matodzi, they wrote a letter to Dyambeu requesting that they want their shares in their personal capacity. Even the king wanted his 51 per cent in his individual capacity … so we blocked that,’ said Mabilu, the man who originally made Matodzi’s VBS investment possible by pitching in R3 million at the insistence of his one-time friend, the king. ‘We said to the king, you did not even buy the shares, they don’t belong to you anyway, they belong to the VhaVenda Trust and the trust is supposed to be the trust for the Venda people which means the dividends or whatever goes into … these shares belong to the community, you are just a custodian. That’s when they realised they were not winning, then they established Vele.’7

Vele Investments was named for another Venda king, Vele-la-Mbeu, who reigned in the 1700s. The company was set up in the first week of November 2015 by a law firm called Khampha Inc. Its immediate owner was a holding company called Vele la Mbeu, but its indirect owners were unclear from the start, although at least Matodzi and the king were by all accounts shareholders.

The way Vele found its way into VBS is mired in controversy. Mabilu and Phalanndwa claim it was clearly fraudulent, a view that would later be shared by the authorities.

On 18 December 2015, VBS called on shareholders to take part in a rights issue. This is when shareholders are asked to contribute new capital to the company in proportion to their shareholding. The deal put to them was to buy two new VBS shares for every one share they already owned. For the PIC and Dyambeu that would mean R12 million each. The general body of about 400 smaller shareholders would have the same opportunity.

Something strange happened in the run-up to this rights issue. On a single day, 27 November 2015, the bank extended massive vehicle loans to Matodzi, VBS CEO Andile Ramavhunga, the bank’s supposedly independent director Ernest Nesane from the PIC, the king and his advisor Paul Makhavhu, and a company called Venmont Holdings, owned by Matodzi. Collectively, the loans were worth R11.5 million.

It was less than three weeks before the new rights issue was announced, although it is speculation that the two are connected. Whatever the case, this mass loan to VBS bosses and shareholders was the first discernible case of major conflicts of interest. Furthermore, just three days before the rights issue was announced, the bank extended Nesane a R1 million mortgage, which he never declared. He also seemingly didn’t have any misgivings when his employer was asked to put more money into VBS.

The VBS corruption machine had been modestly born.

The rights issue was not well received by Dyambeu, but both they and the PIC pitched in the R12 million. If they hadn’t, they would have ended up with smaller shareholdings in VBS.

But there had been a sleight of hand. Somehow, without anyone knowing it at the time, Vele Investments had crept into the mix and emerged from the rights issue apparently owning about 4 per cent of the bank. The PIC and Dyambeu didn’t have a clue what was happening, and they still don’t understand how Vele could even participate in the rights issue when it was not a shareholder to begin with.

According to Matodzi, this was achieved in the same way he had become chair of VBS: mobilisation on the ground. After organising the VBS Shareholders Forum, he became the go-to guy for the ordinary small shareholders. ‘Since I was very active with this forum, there would be people who for various reasons would be selling shares. Small shares … and I would buy that,’ he told me.8 Collecting small shareholdings on an ongoing basis set Vele up to legitimately participate in the rights issue, he said.

This is not entirely true. Vele’s route into VBS’s share register was not properly explained until much later. Matodzi collected the 4 per cent shareholding in the bank, but only transferred it to Vele after the rights issue. He allegedly backdated the paperwork long after the fact.9 This set him up for the daring scam that followed.

Much later, when the PIC’s affairs came under scrutiny at the Mpati Commission of Inquiry set up in October 2018, one of the portfolio managers, Khaya Zonke, would testify how they were caught off guard and later demanded answers from VBS: ‘The issue around Vele was very problematic to us in that we asked for a registration of shareholders from the company. We wanted to find out exactly how this entity came from zero shareholding to, I think at the time they held about 4 per cent after the first rights issue, and after the second rights issue they were majority shareholders in the business. We expressed our concerns and management actually never responded to our concerns.’10

Matodzi now had a foot in the door as a direct shareholder of the bank while he built Vele Investments. It wouldn’t be long before Paul Makhavhu, the king’s man, showed up as a director of this new company. It was seemingly a way of getting both Matodzi and the king out from under Dyambeu’s thumb. Matodzi’s trick, however, was pointless unless he already knew how things were going to unfold. To some extent it didn’t matter whether he was a shareholder or not at this early stage. It was not clear how a 4 per cent shareholding helped anyone.

What Matodzi did have was a growing hold over the management and board of VBS. His Venmont Holdings had started playing a role behind the scenes. On 9 February 2016, it paid VBS CEO Ramavhunga R50 000. It did the same the next month. And the next. Ramavhunga was seemingly getting a top-up second salary from Matodzi.

The capture of the bank continued apace. The 2015 AGM had led to Matodzi becoming VBS chairman. The 2016 AGM gave him even more sway.

Manelisa Mavuso, Dyambeu’s pick for chair in 2015, had stayed on the VBS board as their representative and was keeping David Mabilu in the loop about potentially shifty credit decisions.11 The 2016 AGM was set up to oust him.

According to Matodzi’s ex-partners, Dyambeu was made to miss the AGM. Instead of getting twenty-one days’ notice and time to prepare, Mabilu claims Dyambeu got wind of the meeting scheduled for 29 July 2016 less than a day beforehand. He immediately had their lawyers send a letter to VBS demanding that the AGM be postponed. They didn’t get a response and the meeting went ahead without them. This had one immediate consequence: Mavuso was shown the door.

A number of positions on the VBS board were once again open to a vote from shareholders. Three directors were at the end of their terms, but had made themselves available for re-election. They were Mavuso, the PIC’s Ernest Nesane and Phalaphala Avhashoni Ramikosi, the CFO of the South African Police Service (SAPS). Ramikosi would later be suspended from his position amid a tender-fraud investigation on top of the charges he faced in relation to VBS.

At the AGM, Azwindini Kwinda, chairman of the VBS Shareholders Forum, tabled a motion to get rid of Dyambeu’s man, Mavuso.12 Without Dyambeu present, the other shareholders unanimously voted for the motion on the basis that Mavuso never attended AGMs. They weren’t wrong, but Dyambeu argued that AGMs were for shareholders, so his attendance was not required.

Defensible or not, Matodzi now had an even more pliant board with Nesane already compromised by two large VBS loans that he never declared to his employer, the PIC. On top of that, Matodzi had a shareholding in VBS and a CEO he was apparently bribing.

Following the 2016 AGM that saw Dyambeu sidelined, VBS set about organising a second rights issue. This ratcheted up the tensions between Matodzi and his old partners to breaking point.

The notice to shareholders was dated 24 August, but apparently only reached Dyambeu on 7 September. Mabilu went on the offensive, instructing lawyers to demand sight of any resolution properly adopted by VBS shareholders to allow the new rights issue. Instead of providing this readily available document, VBS’s CFO Philip Truter wrote back, tersely demanding that the lawyers prove they worked for Dyambeu.

VBS eventually did produce the minutes of the recent AGM and, as suspected, there had been no resolution to exercise a new rights issue. Furthermore, it would later emerge that VBS had not even bothered to tell the PIC about the plan.

The rights issue went ahead without Dyambeu or the PIC. The inevitable consequence was that Vele’s ownership share in VBS grew in leaps and bounds. By March 2017, the official shareholding of VBS stood at 53.20 per cent Vele, 22.90 per cent individual depositors, 11.96 per cent PIC and 11.94 per cent Dyambeu.13 The appearance of Vele as the majority shareholder was mysterious, as no one had actually heard of the company before now. It participated in the second rights issue on the back of 5 110 VBS shares it had ostensibly bought from Matodzi on 1 April 2016. But as noted, the transfer date had been backdated to April to legitimise Vele’s participation in this second rights issue.14

Matodzi completely denies any underhandedness, saying the PIC was never diluted and that Dyambeu willingly let itself become a smaller shareholder by not taking up new shares. His argument is that the PIC was always intent on participating, but had lengthy internal processes.

The PIC’s internal forensic report prepared by Nexus and an official at the PIC say he is wrong. The PIC official, Brendah Mdluli, told the Mpati Commission of Inquiry that the PIC only received the notice months later, in May 2017. ‘The initial notice of the second rights issues was not sent to me and to the best of my knowledge was also not sent to anyone at the PIC,’ she said.15

According to Mdluli’s colleague Khaya Zonke, Truter evaded the obvious questions afterwards: ‘So we’d raise all these issues and he had all … manner of excuses on why we did not get the notification, ranging from sending it to wrong people and trying to correct that and trying to find out exactly who they should be sending such communiqué to [at] the PIC. So these issues were raised at various stages in both the first and the second rights issue.’16

In both Dyambeu’s and the PIC’s versions, Vele had become the majority shareholder in what was effectively a secret share issue. But beyond the secrecy and the apparent irregularity of the rights issue, there was a far larger problem: Vele allegedly never paid for its own shares. Phalanndwa makes the astonishing claim that, back in 2016, Matodzi had already explained to him how they could buy shares in VBS without paying a cent.

‘I’ll tell you what they did,’ Phalanndwa told me. ‘All these rights issues, they paid no money. He [Matodzi] approached me … and said myself, Andile and he, we must own at least 51 per cent of VBS because we are the brains behind this thing. I said no. If there is any increase in shareholding it must happen through Dyambeu. I said, “But how will you pay for the shares?” They said, “Ah don’t worry, we own the bank, we’ll pass journals [create fake deposits].” So they pay with fake money. I say, “How are you going to do that?” They say, “Don’t worry, the guys know the system.” This was in 2016. I said this thing is going to blow up in our face because … I was taught in accounting that when you put in the right you must put in the left, so how are you going to balance this fake money which you are creating? It means you must take depositors’ money and shift it as something that you’ve got. Now you are telling Reserve Bank you have put R100 million which is not in the bank.’17

Matodzi’s version is that VBS gave Vele a legitimate loan of R80 million so that it could buy shares in the bank in the second rights issue – because management were begging him to take control: ‘Management presented this to me and said you are the only one who can save us or we must close this thing. What must we do to help you? You are not getting support from PIC, Dyambeu is dysfunctional and the Reserve Bank continued to threaten. One of the things I can say, the guys were very disappointed, even the board members. I will not mention their names … Everybody just felt we are being hanged to dry. These guys are coming to me and saying, you brought us here, some of us even cut our salaries to come here for this dream that you sold us. Now look, all these guys … what can we do?’18 VBS management were only too happy to fund Vele’s acquisition of shares, Matodzi claims.

On 4 April 2017, Matodzi wrote a letter on behalf of Vele to VBS’s board, saying Vele ‘hereby makes an offer’ to buy R80 million’s worth of new VBS shares. VBS CEO Andile Ramavhunga then wrote to the VBS board singing Vele’s praises and recommending that they approve the investment. ‘Vele Investments, a company with Venda heritage and a very good understanding of VBS Mutual Bank’s origins, is looking to invest an amount of ZAR 80 million into the Bank,’ he wrote.19 He didn’t mention that VBS would allegedly be lending Vele the money to buy the shares.

Investigations into VBS have revealed that this sequence of events was manufactured, apparently to make the share issue look legitimate. What actually happened is that the VBS board was presented with a proof of payment for the shares that actually referred to a completely unrelated deposit by a company Vele controlled.

The odd thing about this is that the payment of R80 million was made on 6 March 2017, but Vele only approached VBS to buy shares, contingent on the VBS board’s approval, on 4 April. By seemingly using the unrelated deposit as proof of payment, Vele effectively claimed to have paid R80 million for shares a month before even applying to buy those shares. By the time Vele asked for board approval to buy the shares, that R80 million had already been withdrawn again. It took a spectacularly unobservant board to let that slip by, or one completely beholden to Matodzi and just going through the motions of doing the paperwork.

Astonishingly, things just got worse after that.

Mabilu told me that he gave up on VBS in the course of 2016. He only caught wind of the existence of Vele about halfway through the year when Dyambeu’s soon-to-be jettisoned representative, Mavuso, alerted him to the first of what would be many apparently dodgy finance deals: a R136 million loan to Vele to buy a fuel-trading company called Afric Oil.

Afric Oil was owned by the Pembani Group, and Mabilu knew Pembani’s chairman. Word reached him that Matodzi had shown up to negotiate the deal and from there Mabilu joined the dots. ‘I heard through some grapevine that they were going to buy Afric Oil and then VBS was going to finance that,’ Mabilu told me. ‘To me, I realised this is a conflict of interest because you can’t have the chairperson of VBS financing himself.’20

It was at this point that Mabilu decided to step back. ‘Then I distanced myself from VBS activities completely,’ he told me. ‘I just maintained the shareholding. As things were unfolding then, I started hearing there is a new shareholder called Vele. One, two, three, I hear Vele is the major shareholder.’

There was a third rights issue in 2017. This time Dyambeu washed its hands of the whole affair, but the PIC was somehow convinced to double down on its VBS investment. It would not only participate in this new rights issue, it would also retrospectively participate in the earlier, secret one. As things turned out, the PIC paid R90 million to VBS in December 2017 to restore its shareholding. As for Dyambeu, after the third rights issue its shareholding shrank to under 5 per cent, while Vele owned 59 per cent and the PIC 28 per cent.

With the third rights issue, Vele again allegedly faked a payment under the guise of a loan, this time for R90 million. ‘This amount was backed up by a fictitious deposit generated for Vele with no real flows actually occurring,’ said Phophi Mukhodobwane, VBS treasurer and member of the inner circle, in an affidavit to the SARB.21 Matodzi, however, claims that Vele participated in the third and final rights issue using ‘pre-existing facilities’.22

The drawn-out battle between the shareholders of VBS took place over almost the entirety of the bank’s rise and fall. When the dust eventually settled, it was easy to point towards the arrival of Vele as the turning point.

‘[W]hen Vele Investment[s] became the majority shareholder the PIC’s vision for VBS went up in smoke,’ the PIC’s former CEO Dan Matjila told the Mpati Commission of Inquiry in 2019. ‘I think the biggest problem came when Vele came into the picture and shareholding changed and so on and so forth. That is where we hit problems and this thing was on the downwards spiral and all.’23